Today, Treasury secretary Tim Geithner and other senior Treasury officials are meeting with a group of business executives to kick off a discussion of tax reform. Since almost everyone on both sides of the aisle thinks the U.S. corporate tax rate needs to come down to be more competitive with other countries, there is at least theoretically some basis for negotiation. The big question is what revenue-raising measures will be part of the deal to keep it revenue-neutral.

Presently, the basic corporate tax rate in the U.S. is 35 percent. It started out at just 1 percent in 1909, rose to 40 percent during World War II, and to 52 percent during the Korean War. The Kennedy/Johnson tax cut reduced it to 48 percent in 1965. It fell to 46 percent during the Carter administration, and the Tax Reform Act of 1986 lowered it to 34 percent. Bill Clinton raised it to 35 percent and it’s been there ever since.

After the 1986 act, the U.S. had one of the lower corporate tax rates in the world. Germany had a rate of 56 percent; Italy, 52 percent; Japan and France, 42 percent; the U.K, 35 percent; and Canada, 29 percent. But by 2010, the U.S. had one of the higher rates. Germany’s rate was down to 15 percent; Italy, 27.5 percent; Japan, 30 percent; France 34 percent; the U.K., 28 percent; and Canada, 18 percent. And last month Japan announced a further cut in its corporate rate to 25 percent.

France, Italy and the U.K. impose no subnational corporate taxes, nor do most other OECD countries.

The U.S. is also one of only a few major countries to impose corporate income taxes at the state or provincial level. The Organization for Economic Cooperation and Development estimates the average state corporate tax rate at 6.5 percent. Because state taxes are deductible at the federal level, the combined rate works out to about 40 percent. France, Italy, and the U.K. impose no subnational corporate taxes, nor do most other OECD countries.

It is taken for granted by politicians that the corporate tax has a critical impact on competitiveness. But the term “competiveness” is basically devoid of meaning. To economists, it essentially means productivity. On this score, the U.S. still ranks at or close to the top of major countries. According to the Bureau of Labor Statistics, real gross domestic product per employed person in the U.S. was $99,763 in 2009, well above France ($84,978), the U.K. ($77,878), Italy ($77,363), Canada ($75,676), Germany ($74,120), and even Japan ($65,507).

More subjective measures of competitiveness also rank the U.S. near the top. In 2010, the World Competiveness Yearbook put the U.S. in third place among all counties; only tiny Hong Kong and Singapore ranked higher. The World Economic Forum ranked the U.S. in fourth place, behind Switzerland, Sweden and Singapore.

There is a pervasive sense among many if not most Americans that our competitiveness is slipping. The reality is somewhat different.

Nevertheless, there is a pervasive sense among many if not most Americans that our competitiveness is slipping. I think this mainly has to do with the large trade deficits we have run for some years. The reality is somewhat different. The U.S. is the third largest exporter in the world, with exports not far behind powerhouse China. According to the World Trade Organization, in 2009 the U.S. exported $1.056 trillion worth of goods while China exported $1.202 trillion. However, we imported considerably more: $1.605 trillion versus $1.006 trillion for the Chinese.

Insofar as people are concerned about our international competitiveness, there is not a great deal that tax policy can do. Promoting more research and development would help, but it’s increasingly difficult to keep the benefits at home. Raising productivity would help exports by lowering production costs for domestic producers, but since U.S. productivity is already much higher than most people realize, this is not likely to have much impact on the trade balance in the short run.